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Inland Revenue currently offers a payroll subsidy of up to $10 per pay-run to listed PAYE intermediaries who manage the income tax obligations of eligible employers. Photo Wings Bookkeeping

Support for small businesses through a payroll management subsidy is to continue for a further two years.

Revenue and Small Business Minister Stuart Nash says Cabinet has agreed to extend the subsidy for professional payroll intermediaries who manage an employer’s PAYE obligations, after the previous government decided to end the scheme in early 2018.

Inland Revenue currently offers a payroll subsidy of up to $10 per pay-run to listed PAYE intermediaries who manage the income tax obligations of eligible employers.

The Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill currently before Parliament proposed repealing the subsidy on April 1.

However feedback during the Select Committee stage was critical of the move. The announcement this week reflects the Committee’s recommendations.

“The subsidy was introduced in 2006 as a way to encourage small businesses to use the services of payroll professionals to handle their PAYE obligations. The support from Inland Revenue allows small business operators more free time in order to focus on growing and operating their business,” says Mr Nash.

Cabinet has decided to renew the subsidy for another two years, until April 1, 2020. The eligibility threshold for accessing the subsidy will be lowered from April 1, 2019, to businesses with less than $50,000 of income tax and superannuation obligations (PAYE and ESCT). It’s estimated around 24,000 employers who use a payroll intermediary fall into this category.

“Small business owners told the select committee the subsidy should remain until PAYE process improvements, such as payday reporting of PAYE information, are bedded in. Small businesses have the least payroll capability. The subsidy allows them to outsource this task and offers a significant benefit.

“Small businesses are a vital part of our economy. At a time when those companies will need to get to grips with other changes in the PAYE process, they need this support to allow them to continue to focus on their core enterprise,” Mr Nash says.